Home Depot (NYSE:HD) saw demand for do-it-yourself products and big-ticket items outstrip expectations in the first quarter, as rising home values encourage homeowners to open their wallets.
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The worldâs largest home-improvement retailer said the housing market has provided a tailwind for Home Depot stores. The most recent S&P/Case-Shiller Home Price Index showed that U.S. home prices moved 5.3% higher in the 12 months ended in February. On Tuesday, the U.S. Commerce Department said housing starts were up 6.6%, good for a seasonally adjusted rate of 1.17 million units in 2016.
In the first three months of the year, sales at existing Home Depot stores were up 6.5%. Spending at U.S. stores was even better with domestic comparable sales rising 7.4%. Home Depot also said the average ticket grew 2.5%. Given the strong start to 2016, Home Depot lifted its financial guidance for the whole year.
Home Depot Chief Financial Officer Carol TomÃ© said higher home values are driving consumers to invest in upgrades. The company believes home prices will climb about 5% this year, followed by a possible 3% increase in 2017.
âThe housing data suggests that homeowners feel like they have more value than they did before. Homes with negative equity have dropped from 22% at the beginning of 2012 to now 8.5%,â TomÃ© told analysts during a conference call.
Beyond DIY demand, Home Depot detailed ongoing sales momentum in its Pro business, which primarily consists of contractors. Pro-heavy categories including fencing, doors and decking posted double-digit growth in comparable sales last quarter.
CEO Craig Menear emphasized that demand has picked up across the store. With consumers spending more, Home Depot recorded 9.5% more tickets over $900.
âWhile our Pro business was strong, weâre also very pleased to see the growth in our DIY business. The balance is what weâre striving to achieve,â Menear said.
|HD||THE HOME DEPOT INC.||179.235||+1.57||+0.89%|
|LOW||LOWE'S COMPANIES INC.||84.4586||+0.52||+0.62%|
The Atlanta-based retailer said Tuesday its quarterly revenue surged 9% to $22.8 billion versus the same period a year ago. Earnings rose 14% to $1.8 billion. On a per-share basis, Home Depot earned $1.44 a share. Wall Street analysts had forecasted per-share earnings of $1.36 and revenue of $22.39 billion.
Home Depot now expects to book full-year earnings of $6.27 a share on revenue growth of 6.3%. The company previously said earnings would likely come in between $6.12 and $6.18 a share, with revenue rising 5.1% to 6%. Home Depotâs outlook for comparable sales calls for a 4.9% improvement, better than its prior guidance for 3.7% to 4.5%.
Home Depot executives are looking for another strong run in the second quarter, citing a late start to spring in many areas of the country. Loweâs (NYSE:LOW) is scheduled to report first-quarter earnings Wednesday.
Home-improvement stores have been a bright spot in a sluggish retail industry. The Commerce Department said home-improvement spending in March edged 1.4% higher versus February. Meanwhile, total U.S. sales at retail stores and restaurants declined 0.3%. The Home Improvement Research Institute and research firm IHS have projected 4.7% industrywide sales growth in 2016 compared to last year.